Frequently Asked Questions in Real Estate Transactions
Here are several frequently asked questions that pertain to residential real estate transaction processes, fees, and general inquiries. Feel free to leave a comment if you have a question to add to the list and I am happy to answer. I will update this list frequently. Please understand that real estate laws change frequently and the answers below are based on certain circumstances and will not be true for every situation.
How much do I have to pay my real estate agent?
- If you are a buyer the answer is usually nothing! In Florida the seller typically bears the cost of paying the agents commission upon the sale of the property. This is an expense associated with the sale because the brokerage has advertised the property, placed the listing in a MLS, facilitated showings, and so on. In some cases, a buyer may wish to purchase a for sale by owner. Under this circumstance the FSBO has typically opted not to pay an agent for his or her real estate services but the buyer may opt to be represented because many FSBO’s are not completely understanding of the transaction process. In that scenario the buyer may decide to pay the broker a percentage of the sale price or a flat rate. All commissions are negotiable. Under this circumstance the real estate agent will typically have the seller sign a No Brokerage Relationship disclosure.
If I like a property and want to buy it, what is the next step?
- If you are paying cash, the next step is to write an offer! If you are obtaining a loan, the best course of action is to get a prequalification letter from your lender of choice in the amount you are considering. This shows the seller you are actually qualified to purchase the property and makes negotiations a little more realistic.
How much will a seller come off list price?
- Every property owners situation is different. Highly demanded properties will sometimes sell for more than list price, and properties in need excessive repairs will sometimes deviate from list price quite a bit more or opt to fix problems and retain value. Transaction brokers have limited confidentiality and therefore may not reveal that the seller might accept a price less than list price or the motivation of the seller unless otherwise waived in writing by the seller.
Can I come in with a very low offer?
- Your agent will write whatever offer you like. But bear in mind many sellers have an emotional attachment to their property, so do not be alarmed if they are offended or do not counter offer at all. If that’s the case you know the seller expects an offer much closer to list price.
How much money do I have to put down to purchase a property?
- This is a loaded question because it all depends on a variety of factors including your individual purchasing power and credit, as well as the type of property you are purchasing and it’s primary use. These factors combined make it near impossible to answer with even half certainty but I can give you a few general rules that tend to raise or lower the amount required down by a lender. If you are purchasing a property to be used as your primary residence the flexibility is significantly greater than purchasing an investment property. There are a greater variety of loan structures available to those purchasing for a primary residence, and in some situations such as USDA loans, a buyer with excellent credit and debt to income ratio could be required to put 0-5% down. Lenders seek to minimize risk, investments are considered riskier so the initial outlay will usually be more than required for a primary residence. Lenders also consider condominiums (especially at the beach) to be a riskier investment because of their rental ratios, therefore it is rare that we see any less than 20% down for a condo investment or 2nd home in New Smyrna Beach and 30% is more common. NONE OF THESE NUMBERS ARE NOT TRUE UNDER EVERY CIRCUMSTANCE, this only meant to give a general idea.
Do I need to pay for a survey if I’m pretty sure where the lot lines are?
- If you are financing the property your lender will absolutely require a survey. If you are paying cash you do have the option to forgo a survey but it is highly recommended you get one anyway. Outside of simply having the general knowledge of your exact property lines, utility easements, setbacks, and so on, complications can arise in the future if, as a buyer, you chose to opt out from getting a survey. Lets say you are ready to sell your property but you’ve never had a survey done because when you purchased you paid cash and decided not to spend the extra money. When you bought the property your neighbor had a concrete fence around their entire back yard. You never thought anything of it and if anything saved money on not having to erect your own fencing on one side. Your new buyer has a loan so he gets a survey a week from closing and realizes the concrete wall fence is actually 10 feet onto your property. The bank will not close, the neighbor demands if the fence is moved that you pay for it, and you’re stuck with 10 feet less property on one side and a very messy situation. If anything, get a survey for the future sale…even if you plan to make no improvements or changes.
If there is an issue with the inspection, can I get my deposit back?
- When agents use a standard the FARBAR As-Is contract for purchase the buyer is protected by a specified inspection period. The inspection period is the buyers primary opt out for receiving the deposit back in full. Inspection periods can be negotiated but for the sake of example we will use the default value of 15 days. During that time frame the buyer an opt out for any reason he or she sees fit and in his or her “sole discretion”. I like to use the example, “if you think a blade of grass is out of place you can opt out and request your deposit be returned as long as we are still within the inspection period”. In rare circumstances, sellers will try to fight the inspection period opt out but in the end it’s essentially a lost cause because the contract spells it out in bold that the deposit shall be returned to the buyer in the event the property is deemed unsuitable within that time frame. It is for this reason, many sellers will try to negotiate a shorter inspection period so the buyer shows commitment to the offer and so the seller doesn’t waste 15 days off market. High demand property owners will often seek very short inspection periods because they would prefer not to wait on iffy buyers to consider different options or negotiate repairs.